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South Korea’s ‘M&A king’ SK Group pursues path away from fossil fuels

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SK Group, South Korea’s third-biggest company, has vowed to end all new oil and gas investments overseas and slash its carbon emissions by two-thirds, as it plots a transformation away from fossil fuels.

The U-turn by one Asia’s top producers of oil, computer chips and electric vehicle batteries is a victory for international investors and environmental activists, who have sharpened their criticism over how Asia’s corporates respond to climate change.

The move, spearheaded by SK’s chairman and biggest shareholder Chey Tae-won, is also emblematic of how the acquisitive Korean group is stepping up its challenge to the country’s leading chaebol, the family-owned conglomerates that dominate the economy.

Mr Chey has ordered a sweeping readjustment of SK’s portfolio to be completed within the next three years. This will include carving off carbon-intensive businesses and doubling down on the company’s multibillion-dollar bets across EVs, computer chips, biotechnology and renewable energy.

“The era of competing for scale is now behind us . . . We want to be the best company in the ESG realm,” Jang Dong-hyun, president of SK Holdings, which helps oversee SK’s 125 affiliates, told the Financial Times in an interview.

SK’s pivot is driving M&A activity and capital expenditure. In recent weeks, the group bought Intel’s memory business for $9bn and spent $1bn to purchase South Korea’s biggest waste disposal company. SK Innovation, the oil refining unit increasingly focused on EV batteries, is spending $8bn building factories to serve carmakers in the US, China and Europe.

James Lim, an analyst at US hedge fund Dalton Investments, said the strategy was “bearing fruit” in the minds of some international investors. “SK is several steps ahead of most other chaebol in terms of future-oriented portfolio restructuring and ESG investments,” he said.

Mr Jang said the changes were “inevitable”.

Rival Korean companies, including Samsung and Kepco, the state-backed energy group, have been panned by European pension funds and environmental groups for backing the coal industry.

Mr Chey, 59, has already overseen rapid growth at the family-owned SK Group since taking over the company after the death of his father in 1998, during the Asian financial crisis.

SK now generates more than half of its revenues overseas, employs 100,000 people and has made Mr Chey one of South Korea’s richest men.

SK carves off carbon-intensive businesses

SK’s group-wide assets have increased seven-fold to Won225.5tn ($202bn) last year under Mr Chey’s leadership. Sales have quadrupled to Won139tn and net profit rose 80 times to Won8tn.

One industry leader described the company as a “kingdom built on M&As”.

The latest deal spurt has prompted suggestions that SK is modelling itself on SoftBank, the Japanese telecoms group turned tech investor

SK bristles at the SoftBank comparison, insisting that its M&A strategy is centred on buying companies that boost its existing businesses and carving off non-core units.

“Controlling the whole value chain brings a lot of benefits as you can create synergies through co-operation between units . . . It increases your understanding of the whole business or industry, therefore reducing the risks of failures,” said Mr Jang.

SK pledges to overhaul portfolio with ESG drive

SK lacks the global brand recognition of rivals such as Hyundai and LG. But the newfound attention has revived uncomfortable questions over family control, corruption, political ties and intellectual property theft.

Mr Chey was convicted of accounting fraud and misappropriating company funds in 2003 and 2014, respectively. His stints behind bars were cut short and he later received presidential pardons. SK declined to comment, noting completed legal processes.

The company currently stands accused of illegally acquiring sensitive EV technology from Korean competitor LG Chem, in a dispute that threatens its $2.6bn investment in building factories in Georgia, the largest single investment in the US state’s history. SK denies the claims.

The company has won praise from some investors, including Mr Lim, for moving ahead of other chaebol in abandoning a complex web of cross-shareholdings for a more conventional holding company structure, as well as bringing in outside, independent directors.

For some, however, the reputational stain from past wrongdoing remains.

Kim Woo-chan, an economics professor at Korea University, said: “The amount of [alleged] fraud was several times bigger than Enron’s and Mr Chey was imprisoned twice for serious financial crimes but he still controls the group — this would be unthinkable in the west.”

SK Group charts a turbulent rise from the ashes of Korean war

1953

Foundation of Sunkyong Textiles

1980

Acquisition of Korea Oil (now SK Innovation), South Korea’s top refiner

1994

Acquisition of Korea Mobile Telecom Service (now SK Telecom), South Korea’s leading mobile operator

2008

Acquisition of Hanaro Telecom (now SK Broadband), a South Korean broadband provider

2012

Acquisition of Hynix (now SK Hynix), the world’s second-largest DRAM producer

2016

Acquisition of OCI Materials (now SK Materials), a South Korean semiconductor material company

2017

Acquisition of LG Siltron (now SK Siltron), a South Korean silicon wafer producer

2018

Acquisition of AMPAC, a US pharmaceutical contract manufacturer

2019

Acquisition of KCFT (now SK Nexilis), the world’s largest battery copper foil maker

2020

Acquisition of EMC Holdings, South Korea’s largest waste disposal company



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Ebay to sell South Korea unit for $3.1bn as local rivals target Coupang

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Ebay is set to sell its South Korea business to a local consortium for $3.1bn, according to people with knowledge of the matter, as rivals seek to turn up the heat on SoftBank-backed Coupang in the world’s fourth-largest ecommerce market.

The consortium, which consists of South Korea’s biggest bricks-and-mortar retailer E-Mart and internet group Naver, plans to buy an 80 per cent stake in eBay Korea for Won3.5tn ($3.1bn) with the US company retaining the remainder, said the people.

The purchase could help the consortium to overtake fast-growing Coupang, which raised $4.6bn in an initial public offering in New York in March to become the biggest player in South Korea’s highly competitive ecommerce market. Japanese technology group SoftBank is a large investor in Coupang.

Ebay Korea was the country’s third-largest ecommerce company with a 13 per cent market share last year, according to research group Euromonitor. Its three platforms — Gmarket, Auction and G9 — recorded Won20tn in transactions last year, data from Meritz Securities showed.

Euromonitor has forecast that South Korea’s ecommerce market will grow by 11 per cent this year to $116bn. But it is a fragmented market of more than a dozen players, with Coupang and Naver controlling 19 per cent and 14 per cent shares in terms of transaction volume, respectively.

South Korea is one of the world’s largest and fastest-growing ecommerce markets, driven by its tech-savvy population, high-speed internet infrastructure and densely populated environment. Ecommerce accounted for 35.8 per cent of the retail market last year, compared with 28.6 per cent in 2019, Euromonitor data showed.

E-Mart plans to fund the deal with Won3tn of asset-backed loans with the remainder paid by its cash holdings, while Naver will contribute Won100bn, according to an industry official close to the situation.

“Despite the funding structure, E-Mart needs Naver to make up for its weak online networks,” said the official.

Conglomerate Lotte Group and E-Mart were the final bidders for eBay Korea. Both have struggled to catch up with Coupang, which is investing heavily in logistics to boost its delivery times. Coupang almost doubled its revenues last year to $12bn as more consumers shifted to online shopping during the Covid-19 pandemic.

“Both Lotte and E-Mart were eager to take over eBay’s operations but E-Mart offered about Won500bn more,” added the industry official.

Naver is one of Korea’s most popular internet portals and more than 40 per cent of eBay Korea’s customers access it via the former’s search engine.

Shinsegae, E-Mart’s parent company, and Naver partnered in March by swapping stakes in each other worth Won250bn.

Ebay Korea declined to comment. E-Mart said in a regulatory filing that it was in talks with eBay but a sale had not been finalised. Naver said in a separate filing that the deal had not been concluded.



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ByteDance revenues more than doubled in 2020 to $34.3bn

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ByteDance increased its revenues 111 per cent last year to $34bn and had 1.9bn monthly users across its apps at the end of the year, said its incoming chief executive Liang Rubo on Thursday, according to people familiar with the matter.

The owner of the short-video apps TikTok and Douyin recorded a surge in users as coronavirus lockdowns across the world left people searching for more entertainment online. Douyin, the Chinese sister app to TikTok, was ByteDance’s largest driver of revenue and has become a destination for shoppers looking to buy products from livestreaming presenters.

Facebook, the world’s biggest social media group, reported 2.85bn monthly users as of March 31.

ByteDance recorded an annual gross profit of $19bn but a net loss of $45bn for the year because of non-cash items including share-based compensation and fair-value changes of its shares, and heavy investment in new businesses, the people said. The company had 110,000 employees at the end of they year.

The financials were first reported by the Wall Street Journal and Chinese media.

Its chief rival in China, Kuaishou, reported a net loss of $15.4bn on $8.5bn in revenue last year — four times less than ByteDance — and 481m monthly users during the period. Kuaishou is trading in Hong Kong at a market capitalisation of HK$801bn ($103bn), while ByteDance has yet to reveal its plans for an initial public offering.

ByteDance raised about $5bn in December at a $180bn valuation, according to people familiar with the matter. The Beijing-based company is the world’s most valuable start-up, according to CB Insights. 

Liang made his first all-hands staff meeting speech on Thursday after he began the transition to chief executive last month, following founder Zhang Yiming’s announcement that he would step down at the end of the year. Zhang said he wanted to focus on innovation and “longer-term initiatives”.

Liang, a ByteDance co-founder who staff regard as Zhang’s loyal right-hand man, was previously head of human resources. Even after a six-month handover period, staff said they expected him to not make big changes and to continue taking direction from Zhang.

As Beijing increases its scrutiny of tech giants, several high-profile founders and chiefs have stepped back this year. Colin Huang stepped down as chair of ecommerce platform Pinduoduo in March, days after Eric Jing resigned as chief of Ant Group.

Liang told employees he was disclosing the financial figures as part of a drive for greater transparency at the company.



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Coronavirus latest: Royal Caribbean delays inaugural sailing of ship due to Covid cases

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Monique Roffey in London with a poster of her novel ‘The Mermaid of Black Conch’
Monique Roffey in London with a poster of her novel ‘The Mermaid of Black Conch’, which is published in paperback this month by Vintage © Monique Roffey

In April 2020, as coronavirus spread around the world, Monique Roffey published her seventh book.

She went with UK-based Peepal Tree Press, a small Caribbean-focused independent company, to publish The Mermaid of Black Conch after the majors rejected her fantastical tale of a mermaid from another era.

“Indie published me in the eye of the storm,” Roffey says. “I did everything I could to get it noticed.”

The Trinidadian-born author crowdfunded £4,500 for a publicist for her novel but as the healthcare crisis took hold she feared her mermaid tale would slide by unnoticed.

She was struggling to pay the rent while the Covid-19 crisis cancelled book tours and festivals.

“Covid was potentially disastrous for my book,” she says. “It was in danger of falling into the Covid chasm.”

But then the lyrical tale of loneliness, love and otherness caught the attention of the literary world and judges applauded it. In January, the novel won the prestigious £30,000 Costa book award, with judges calling it “extraordinary”, “captivating” and “full of mythic energy and unforgettable characters”.

And, bingo, suddenly everyone wanted to read about the mermaid Aycayia, says Roffey, who (full disclosure) attended the same school in the outskirts of Port-of-Spain as I did. 

The story has sold about 60,000 copies in print and online and this month it is published in paperback format by Vintage. For two consecutive weeks this year the novel topped The Times bestseller list. Film rights could well be next.

“Against all the odds, I have done well during Covid,” Roffey says from her home in London. “In 20 years of writing, with many ups and downs, I have seen nothing quite like this.”

Her novel of fantasy and folklore tapped into a desire for reading and imagination during the dark days of coronavirus-induced lockdowns. Roffey joined many authors pivoting online with book launches and literary festivals, which meant she gained global readers.

“In 2020, the nation turned to books for comfort, escapism and relaxation,” says the Publishers Association, the UK’s trade organisation that serves book and journal publishers. “Reading triumphed, with adults and children alike reading more during lockdown than before.”

Income from fiction rose 16 per cent last year to £688m, while the total for consumer publications rose 7 per cent in the UK to £2.1bn, the UK trade body says. 

“Basically a book, which was roundly ignored, rejected, published in the first Covid wave and that nobody registered,” was relaunched, Roffey says.

From nobody wanting the book, suddenly billboards of its cover are cropping up around town, she adds.

This is the sixth article in a series for the blog that explores the effects of the pandemic on people and businesses around the world



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